Have you completed 5 years of experience in your current company? then you must know this…
In India, the Payment of Gratuity Act, 1972, governs the payment of gratuity to employees. The Act applies to establishments employing ten or more persons and is designed to provide a monetary benefit to employees for their long and continuous service to the organization.
Key provisions of the Payment of Gratuity Act, 1972:
Eligibility:
Employees who have completed at least five years of continuous service in an establishment are eligible to receive gratuity. However, certain exceptions apply in case of death or disability.
Calculation of Gratuity:
The gratuity amount is calculated based on a formula:
(Last drawn salary * 15 / 26) * Number of years of completed service
Maximum Limit:
As of my last knowledge update in January 2022, the maximum amount of gratuity payable under the Act is Rs. 20 lakhs.
Payment Events:
Gratuity is payable on the employee’s retirement, resignation, superannuation, or death. In the case of death or disability, the five-year eligibility criterion is waived.
Nomination:
Employees are allowed to nominate a family member to receive the gratuity amount in the event of their death.
Applicability:
The Act applies to employees in factories, mines, oilfields, plantations, ports, railways, and certain other establishments.
Gratuity Fund:
Employers of certain establishments may establish a gratuity fund for the purpose of providing gratuity benefits to employees.
It’s important to note that the specifics of the Payment of Gratuity Act, 1972, including eligibility criteria, calculation methods, and maximum limits, may be subject to amendments. Therefore, it’s advisable to refer to the latest version of the Act or consult legal experts for the most up-to-date information.